Fraud costs rise, challenging online businesses

Fraud is taking a bigger bite out of UK online revenues according to the figures come from a survey of 150 online merchants undertaken by CyberSource. One in eight businesses in 2008 suffered fraud losses in excess of 5% of total online revenues, while rates of more than 1% are now common.

40% of merchants saw their rate of fraud loss increase in 2008, slightly more saw their rates remain static. Overall, the rate of fraud increased 2.6%. Rates for approximately 13% of merchants climbed more than 20%. 37% of merchants now see revenue losses due to online fraud of 1% or more.

The cost of fraud cannot be measured in direct losses alone: more than one fifth of merchants reject over 5% of orders on suspicion of fraud, and some of these orders are likely to be valid. Merchants also have to shoulder the cost of implementing various anti-fraud tools and employing staff or outsourced service providers.

The losses come despite continued investment by merchants in tackling the fraud problem. The addition of support for the Verified by Visa and MasterCard SecureCode schemes has been the most popular anti-fraud investment in 2008 with 16% of merchants integrating the programmes.

Approximately 60% of UK merchants now employ these services. The report also showed that many merchants continue to rely heavily on manual reviewers to identify fraud, with 10% reviewing every single order.